Japan’s Role in G20 Tackling Currency Volatility

Japan considers the reaffirmation of commitments against excessive foreign exchange volatility in the latest G20 joint communique a significant achievement, as stated by Finance Minister Shunichi Suzuki on Friday.

“We believe there were major achievements at G20, such as the inclusion of the reaffirmed foreign exchange commitments in the joint communique,” Suzuki mentioned during a press conference after the G20 finance ministers and central bank governors meeting in Rio de Janeiro.

The commitments underscore the G20 economies’ recognition that excessive volatility or disorderly movements in exchange rates can negatively impact economic and financial stability.

Japan’s top currency diplomat, Masato Kanda, highlighted that Japan advocated for the inclusion of these commitments in the communique to avoid sending misleading signals to the market.

Despite a weak yen boosting exports, it has raised concerns among policymakers due to the increased cost of imports and its negative impact on consumption.

This week, the yen rallied sharply, recovering from 38-year lows reached earlier this month as market participants unwound their short positions ahead of an upcoming Bank of Japan (BOJ) meeting.

Some politicians have recently urged the BOJ to provide more clarity on its rate hike plans to prevent the yen from testing new lows against the dollar.

During the G20 meeting, Suzuki met with U.S. Treasury Secretary Janet Yellen to discuss various topics, including Russia, taxation, and markets. Kanda confirmed that foreign exchange was also on the agenda, noting it was part of the routine communications between the two countries without any major issues needing immediate attention.